Late rally sees FTSE 100 hit a five-year high

THE FTSE 100 staged a late rally yesterday when shorts got squeezed by the continued resilience of the market on the back of rising investor confidence.

Britain’s top share index closed up 20.73 points, or 0.3 per cent, at 6,359.11, and touched an intraday high of 6,384.70 – its highest in five years.

The index, however, fell short of its highest closing level since January 3 2008 with some late profit taking and strong resistance seen at 6,400, according to technical analysts.

The latest market rally has stretched back to November 19 2012 without a correction, squeezing the bears and fuelling the bulls’ appetite for equities.

Miner ENRC, up three per cent yesterday, has rallied 26 per cent over the last week as bid rumours refuse to go away. Vodafone fell 1.1 per cent on reports it weighing up a bid for Germany’s Kabel Deutschland, leaving further question marks over its dividend outlook.

“(There is) limited scope for additional leverage at Vodafone while maintaining dividend cover,” Simon Maughan, strategist at Olive Tree Securities, said.

Maughan said that while addressing it's lack of fixed line ‘back-haul’ capacity by buying Cable & Wireless in the UK and TelstraClear in New Zealand, obvious gaps remain for Vodafone in Germany, Spain and Italy, and less pressingly in Holland and Portugal.

Elsewhere on the upside, Tullow Oil recovered some recent losses, up 6.8 per cent after releasing a set of Kenyan well test results, which it said could lead to the country's first commercial production.

“Whilst this test rate exceeds prior guidance, some of this positive news should be in the price, with the stock trading up after disappointing announcements yesterday,” Canaccord Genuity said in a note.

Reckitt Benckiser, maker of Strepsils throat lozenges and Mucinex decongestant, was up 1.3 per cent after beating profit forecasts. UBS provided a boost for Petrofac, which rose two per cent after the investment bank upgraded the oil services firm to “buy” from “neutral” after recent underperformance following a profit warning from European peer Saipem.

IMI, meanwhile, fell 0.8 per cent after UBS cut its rating to “sell” from “neutral”, saying the company faces severe margin pressures in its service division, and is not as deserving of its new multiple as other engineers.

AstraZeneca, BP, Royal Dutch Shell and Sage Group all restricted further gains on the index after they traded without their dividend attractions.